Mutual Funds/Mutual Fund Expenses


QUESTION: Do you know how to calculate the mutual fund expenses and value from the following information?

On a $1,000 investment in this stock fund from November 1, 2012 to April 30, 2013. A $1,000 investment would be worth at the close of the period, assuming actual returns and expenses:

Assuming actual returns for the six months ended April 30, 2013
Expenses paid per $1,000, $3.22

Ending value (after expenses) $1,164.40

(Expenses are equal to the fundís annualized expense ratio of 0.60%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period)

My question is as follows:

How were the expenses paid per $1,000.00 of $3.22 and the ending value of $1,164.40 determined?

I thank you for your reply.

ANSWER: Hi. I believe this is a homework question and without doing the work on your behalf by performing the calculation (which I am not supposed to do) I am not sure how to answer this question. If I am mistaken in your request, then please let me know. Thanks.

---------- FOLLOW-UP ----------


I want to thank you for your reply.

No, I am not a student and this is not a homework question.  I read this information in a prospectus for a mutual fund.  I was just curious as to how these amount were determined


Thanks for clarifying. One of the challenges in trying to calculate this is knowing exactly when the fund assesses the expenses to the fund. Although it is not done daily, I assume it is done more frequently than quarterly or semi annually. With that being said, the main challenge in calculating true net of fee performance is the fact that the stated expense ratio is only one part of the fee assessed to the fund. The other factor are trading costs which do not get reported. Without backing into the numbers provided and performing some trial and error, it's hard to get the numbers to tie out. Just know that stated performance form the fund resulting form the change in net asset value reflects all costs associated with running the fund. I hope this helps.  

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John D Smith, CFP


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